Working Paper: CEPR ID: DP10216
Authors: Coen N. Teulings; Ioulia V. Ossokina; Henri L.F. de Groot
Abstract: We show that investments in public goods change the optimal land use in their vicinity, leading to additional welfare benefits. This occurs through two sorting mechanisms. First, availability of public goods leads to higher population densities. Second, population groups sort according to their preferences for public goods. We develop a structural spatial general equilibrium model that accounts for these effects. The model is estimated using data on transport infrastructure, commuting behavior, land use and land rents for some 3000 ZIP-codes in the Netherlands and for three levels of education. Welfare benefits of investments in public transport infrastructure are shown to differ sharply by workers? educational attainment. Welfare gains from changes in land use account for up to 30% of the total benefits of a transport investment.
Keywords: agglomeration; land rates; local public goods; residential sorting; spatial equilibrium
JEL Codes: H4; H54; R13; R23; R4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in transport infrastructure (R42) | Shift in commuting modes from car to train (R41) |
| Shift in commuting modes from car to train (R41) | Increase in labor supply in urban centers (J49) |
| Improvements in transport infrastructure (R42) | Job relocation and population density in urban areas (R23) |
| Improvements in transport infrastructure (R42) | Increase in land use intensity and housing demand among high-educated workers (R21) |
| Relocation of individuals (R23) | Welfare benefits from improvements in transport infrastructure (R42) |
| Time savings for those who do not relocate (R23) | Welfare benefits from improvements in transport infrastructure (R42) |
| Increase in land rents (R21) | Demand for land (R21) |
| Investments in public goods (H40) | Higher welfare benefits for high-educated workers (I39) |